New economy, same old rules

The heady days of the dot-com boom are long gone. But names such as Yahoo! and Amazon are turning a profit and appear to be here to stay. There are even some internet brands, such as Lastminute.com, that have managed to survive and carve out a niche in markets where there are already strong offline players.

However, it has not been easy: there have been many casualties along the way, among them Napster, Clickmango and Thestreet. This was inevitable. Investors had become carried away and began to believe that the internet was a goldmine, with unlimited resources. But, just as the early pioneers in the American goldrush came to grief, so did many internet entrepreneurs – after, of course, they had spent the money lavished on them by reckless investors. Basic business principles – providing a product that consumers want at a profitable return – were forgotten in the race to get a stake in the new dot-com culture.

Those internet brands that have survived have had to learn fast and adapt to changing circumstances that have affected the entire economy, both onand offline. Yahoo!, like many media players, has been hit by an advertising recession, but it has sought out new revenue streams, launching paid-for services offering extra e-mail capacity and the forwarding of messages for a fee. Lastminute.com, like many companies in the holiday sector, will have suffered due to the recent global turmoil, but it has extended its offer from flights, holidays and hotel rooms to include lifestyle products which not only work to offset travel trade upsets, but attract consumers more frequently to the site.

One of the keys to survival has been the ability to build critical mass quickly. This is a struggle that is still ongoing. Lastminute.com is buying up internet travel companies across Europe, while Amazon, once just known as a bookseller, is fast developing into a general retailer by selling other products such as kitchen equipment. Many of the smaller players will inevitably get swallowed up or just disappear as they become unable to compete. Dot-coms are finding, like offline brands before them, that the market will only sustain a handful of key brands in any one sector and many internet brands will see the path to survival peter out – the dot-com fallout still has a long way to go.

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